Subprime credit default swap prices swung upward for the sixth straight month in April, making it the longest sustained rally of this type seen since 2007 — and it may continue, according to Fitch Solutions.
Fitch Solutions director David Austerweil said that while the latest index increase in this area was modest at 53 basis points, he thinks mortgage credit quality indicators suggest the rally could continue going forward.
The percentage of delinquent loans in the index dropped to 2.15% in April from 2.75% in March.
Fitch Solutions senior director Alexander Reyngold said the decline in delinquency rates during April were the largest, percentage-wise, since 2006. However, the trend is probably not sustainable at the magnitude seen last month, he said.
Thirty-day delinquencies during the month fell 13.19% and 60-day delinquencies dropped 19.19% from March levels. However, the average month-to-month slide in these delinquency rates during the past year was 3.28%. This suggests the magnitude of April’s extraordinary declines is unlikely to be seen again, but improvements of a more modest size are likely on the way.
Among notable vintage-specific price trends during April, the 2004 vintage saw prices decline 1.02%, a sharp contrast to its 9.36% price increase in March. The 2006 vintage in April saw prices jump 2.55% following an increase of just 0.79% in March.